Correlation Between Formosa Chemicals and Double Bond
Can any of the company-specific risk be diversified away by investing in both Formosa Chemicals and Double Bond at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Formosa Chemicals and Double Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Chemicals Fibre and Double Bond Chemical, you can compare the effects of market volatilities on Formosa Chemicals and Double Bond and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Formosa Chemicals with a short position of Double Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Chemicals and Double Bond.
Diversification Opportunities for Formosa Chemicals and Double Bond
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosa and Double is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Chemicals Fibre and Double Bond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Double Bond Chemical and Formosa Chemicals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Formosa Chemicals Fibre are associated (or correlated) with Double Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Double Bond Chemical has no effect on the direction of Formosa Chemicals i.e., Formosa Chemicals and Double Bond go up and down completely randomly.
Pair Corralation between Formosa Chemicals and Double Bond
Assuming the 90 days trading horizon Formosa Chemicals Fibre is expected to under-perform the Double Bond. In addition to that, Formosa Chemicals is 1.33 times more volatile than Double Bond Chemical. It trades about -0.22 of its total potential returns per unit of risk. Double Bond Chemical is currently generating about 0.01 per unit of volatility. If you would invest 4,300 in Double Bond Chemical on September 24, 2024 and sell it today you would earn a total of 10.00 from holding Double Bond Chemical or generate 0.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Formosa Chemicals Fibre vs. Double Bond Chemical
Performance |
Timeline |
Formosa Chemicals Fibre |
Double Bond Chemical |
Formosa Chemicals and Double Bond Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Chemicals and Double Bond
The main advantage of trading using opposite Formosa Chemicals and Double Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Chemicals position performs unexpectedly, Double Bond can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Double Bond will offset losses from the drop in Double Bond's long position.Formosa Chemicals vs. Formosa Plastics Corp | Formosa Chemicals vs. Nan Ya Plastics | Formosa Chemicals vs. Formosa Petrochemical Corp | Formosa Chemicals vs. Cathay Financial Holding |
Double Bond vs. Nan Ya Plastics | Double Bond vs. China Petrochemical Development | Double Bond vs. Eternal Materials Co | Double Bond vs. TSRC Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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